Bitcoin Miners on Track to Use More Electricity Than All of Argentina

#1

Post by downvote_me » Mon, Jan 15, 2018, 2:36 PM UTC

Bitcoin Miners on Track to Use More Electricity Than All of Argentina
fortune.com

Re: Bitcoin Miners on Track to Use More Electricity Than All of Argentina

#2

Post by nonbel » Mon, Jan 15, 2018, 2:59 PM UTC

Something I've been thinking about is that proof of work "coins" are basically energy credits. When energy is cheap, miners can lower their fees and keep the same return, leading to more economic activity. When it is expensive, they need to raise their fees to stay profitable, thus reducing economic activity.

I think this makes sense. Wouldn't it be beneficial if economic activity scaled with energy availability? It also creates a direct incentive to develop and utilize the most efficient energy sources possible, without regard for the politics between various stakeholders (hydro vs oil vs coal vs wind vs solar, etc).

Re: Bitcoin Miners on Track to Use More Electricity Than All of Argentina

#3

Post by jstanley » Mon, Jan 15, 2018, 3:03 PM UTC

nonbel wrote: post #2

Something I've been thinking about is that proof of work "coins" are basically energy credits. When energy is cheap, miners can lower their fees and keep the same return, leading to more economic activity. When it is expensive, they need to raise their fees to stay profitable, thus reducing economic activity. I think this makes sense. Wouldn't it be beneficial if economic activity scaled with energy availability? It…

> miners can lower their fees

This isn't how fees work. Fees are based purely on supply and demand. The payer sets their fee level when they create the transaction, and it's up to the miners which transactions they will include. Since there is always an excess of transactions, the miners typically select transactions to maximise their payoff.

If miners were to "lower their fees", they'd be accepting low-fee transactions and excluding high-fee transactions, which makes no sense for anybody. The miners would be getting less money than they could, and the people paying high fees don't even get any better service for it.

Re: Bitcoin Miners on Track to Use More Electricity Than All of Argentina

#4

Post by nonbel » Mon, Jan 15, 2018, 3:10 PM UTC

jstanley wrote: post #3

nonbel wrote: post #2

Something I've been thinking about is that proof of work "coins" are basically energy credits. When energy is cheap, miners can lower their fees and keep the same return, leading to more economic activity. When it is expensive, they need to raise their fees to stay profitable, thus reducing economic activity. I think this makes sense. Wouldn't it be beneficial if economic activity scaled with energy availability? It…

> miners can lower their fees This isn't how fees work. Fees are based purely on supply and demand. The payer sets their fee level when they create the transaction, and it's up to the miners which transactions they will include. Since there is always an excess of transactions, the miners typically select transactions to maximise their payoff. If miners were to "lower their fees", they'd be accepting low-fee transacti…

The miners must set a rough minimum fee though. If energy costs rise enough at some point the miners will need to slow/shut down unless the sum value of the fees (in whatever currency is used to pay for the energy) rise above some threshold.

Re: Bitcoin Miners on Track to Use More Electricity Than All of Argentina

#5

Post by AJ007 » Mon, Jan 15, 2018, 3:15 PM UTC

If we had as of precise data on both energy & resource consumption as we have on Bitcoin mining we could remove all taxes and create a consumption/VAT tax based on how much resources and energy something used. That could go a long way in shifting costs that are socialized back in to their consumers and producers.

Re: Bitcoin Miners on Track to Use More Electricity Than All of Argentina

#6

Post by cs702 » Mon, Jan 15, 2018, 3:18 PM UTC

The energy invested in adding transaction blocks to the Bitcoin blockchain (which requires iterating through nonces until one is found that can partially reverse a cryptographic hashing algorithm, consuming computing power) is what makes the blockchain immutable.

Consider: Modifying a transaction block from, say, 3 days ago, is practically impossible, because it would require burning the same amount of energy the entire network has burned over the past 3 days in an instant, before the network invests even more energy adding more transaction blocks. Forget about trying to modify or revert transactions from more than a few days ago.[a]

The energy invested in Bitcoin is securing the transaction history.

There is value in that, no?

[a] Edit: I mean modifying a transaction right now, without forking the blockchain. Please see maxerickson's comments and my responses below.